Live Trade – USD/CHF

Filed under: Live Trades |

Well, my live trades on the gold and USD/JPY pairs both had their stop losses hit, leaving me carrying a 3% loss for February so far. Not the month that I was hoping for. After being up by 9% towards the end of January, I am now experiencing a 6% drawdown, and am up only 3% for the year now – which is a bit of a disappointment given this great start to the year. However, I do have a trade on the USD/CHF pair right now, which could, in theory, turn this all around. Let me explain…

 

Figure 1.

Figure 1.

To begin with, take look at Figure 1. This is the 4-hour chart for the USD/CHF pair. At the top of the chart, you will see a horizontal green band. This is a level of support/resistance on the daily chart. So, when price approached this level and formed a nice bearish pin bar, I put an order in to go short at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target set of eight times the risk. Yes – I said EIGHT. One of the things that attracted me to this trade was the fantastic risk-reward ratio up for grabs. Of course, I would probably move my stop and trail it if the trade moved significantly in our favour, but in theory, a 1:8 risk-reward is possible.

 

Price has since formed a bearish engulfing pattern, which confirms the pin bar and the support/resistance zone. This does not guarantee that price will move down, but it does make the chance of a turn more likely, as the pin bar and the engulfing pattern should create some strength with regards to the support/resistance zone. Well, that’s it for this week, and I’ll be back on Monday with more forex price action trade examples.

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